Ponzi or Pyramid Scheme
Charles Ponzi 1882-1949

Charles Ponzi managed to accrue an estimated $15 million in 1920, with a mansion in Lexington to go with it, by persuading 40,000 Bostonians that he had discovered the secret of making easy money. Psychology, charm, and an indefatigable hunger to be rich were his business assets.

Sometimes called the Pyramid Scheme, or "borrowing from Peter to pay Paul," the game has many variations. In this case, Ponzi sold coupons that could be redeemed at a 50 percent profit in 90 days-and they were! As long as Ponzi could sell coupons to new investors to pay the previous group, the profits continued.

Stories about Ponzi and his financial wizardry were newspaper headlines during the summer of 1920. When the scheme was revealed, Bostonians stormed his office by the thousands to retrieve their money. Ponzi went to jail, tried another quick-money scheme in Florida, and went to jail again. He died penniless in a charity ward in Brazil. His bravado, style, and tireless efforts at amassing wealth led to the bestowal of his name on this form of fraud.

  You Can't Cheat an Honest Man: How Ponzi Schemes and Pyramid Frauds Work...and Why They're More Common Than Ever
by James Walsh